N.J.S.A. 54:32B-12 sets forth a statutory presumption that all sales of tangible personal property are subject to tax until the contrary is established. Previously, the general policy was to impose tax on the entire sales price when taxable products were sold along with non-taxable products for a non-itemized price. In some situations, the true object test or the de minimus test were utilized to make a taxability determination, however, there were no consistent guidelines for applying these tests.
In order to standardize the treatment of certain transactions, the Streamlined Sales and Use Tax Project created an administrative definition of a “bundled transaction” which New Jersey has adopted. (See Streamlined Sales & Use Tax Agreement (SSUTA) Appendix C, Part I) The presumption in New Jersey is that if a sale meets the bundled transaction definition, and any of the distinct and identifiable products are taxable, the sales price is taxable.
There are four exceptions to the bundled transaction definition which, if applicable, require the application of a specific analysis in order to determine the tax consequences of the transaction. The exceptions essentially can be used to overcome the presumption of taxability in N.J.S.A. 54:32B-12, based on the mix of products in the bundle.
A “bundled transaction” is the retail sale of two or more products (including services, digital property, and other products that tax is imposed upon), except real property and services to real property, where:
A “bundled transaction” does not include the sale of any products in which the “sales price” varies, or is negotiable, based on the selection by the purchaser of the products included in the transaction.
(A) “Distinct and identifiable products” does not include:
(B) The term “one non-itemized price” does not include a price that is separately identified by product on binding sales or other supporting sales-related documentation made available to the customer in paper or electronic form including, but not limited to an invoice, bill of sale, receipt, contract, service agreement, lease agreement, periodic notice of rates and services, rate card, or price list.
If the transaction is not bundled because there is only one distinct and identifiable product (e.g. an appliance packaged in a cardboard box), the tax treatment is that of the product.
If the transaction is not bundled because the price of each product is itemized, the tax treatment of each product is considered separately.
A transaction that otherwise meets the definition of a “bundled transaction” as defined above, is not a “bundled transaction” if it is:
(a) De minimis means the seller’s “purchase price” or “sales price” of the taxable products is ten percent (10%) or less of the total “purchase price” or “sales price” of the bundled products
(b) Sellers shall use either the “purchase price” or the “sales price” of the products to determine if the taxable products are de minimis. Sellers may not use a combination of the “purchase price” and “sales price” of the products to determine if the taxable products are de minimis.
(c) Sellers shall use the full term of a service contract to determine if the taxable products are de minimis;
This is not a bundled transaction. In these transactions, since the taxable products are de minimus, the sales price is not subject to sales tax.
(a) the transaction includes only tangible personal property, and at least one product that is: “food and food ingredients”, “drugs”, “durable medical equipment”, “mobility enhancing equipment”, “over-the-counter drugs”, “grooming and hygiene products”, “prosthetic devices” (all as defined in the law) or medical supplies; and
(b) the seller's “purchase price” or “sales price” of the taxable tangible personal property is fifty percent (50%) or less of the total “purchase price” or “sales price” of the bundled tangible personal property. Sellers may not use a combination of the “purchase price” and “sales price” of the tangible personal property when making the fifty percent (50%) determination for a transaction.
This is not a bundled transaction. In these transactions, since more than 50% of the products are not taxable, the sales price is not subject to tax.
In the case of a bundled transaction that includes any of the following: telecommunication service, ancillary service, internet access, or audio or video programming service, the following applies: